U.S. Chamber of Commerce Opposes SEC Shareholder Access Rules

U.S. Chamber of Commerce Opposes SEC Shareholder Access Rules

The United States Chamber of Commerce today submitted a comment letter to the Securities and Exchange Commission strongly opposing the Commission's proposal relating to the inclusion of shareholder nominees for election as director in company proxy materials.

The Chamber's comment letter strongly opposed adoption of the proposed rules for the following reasons:

• The Commission's authority to regulate proxy materials does not permit it to substantively alter state law requirements as to shareholder rights in director elections.
• Recent enhanced corporate governance requirements under Commission and stock exchange rules obviate any need for direct shareholder access.
• Shareholder access to company proxies would be costly and disruptive and would impair the functioning of boards to the detriment of all shareholders.
• There has been no compelling, objective showing of any need for these rules.

The comment letter further stated that if the Commission nevertheless decides to adopt a shareholder access rule, changes to the rules would be necessary to avoid serious damage to the director election process and the rights and interests of all shareholders. In particular, the Chamber recommended the following changes, among others:

• In order to permit shareholders and companies to act in an informed, considered manner, and to avoid the rules having retroactive effect, no trigger event should be deemed to occur before January 1, 2005.
• The rule should have only a single trigger. Duplicative triggers would be confusing to all parties and completely unnecessary. The Chamber recommends that the only trigger should be a majority of votes outstanding being withheld for a majority of management-supported candidates. Anything less does not serve as an indicator of widespread shareholder dissatisfaction with the board or the election process.
• The direct access opt-in trigger should be eliminated or, alternatively, modified to require approval of a majority of votes outstanding.
• The eligibility requirements for nominating shareholders should be increased to avoid abuse of the process by dissident shareholders, and the eligibility requirements for nominees should address compliance with applicable corporate governance requirements.

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Letter to Securities and Exchange Commission (Word doc)